The Payment Modifier: Value Based Purchasing for Physicians

The Centers for Medicare and Medicaid Services (CMS) currently mandates that one perecent of reimbursement for hospital care be based on measures of value and patient satisfaction. This program is called Value Based Purchasing (VBP). Implementation of VBP started on September 1, 2012 and is the beginning of CMS’ transition from paying for volume to paying for value. In 2014, VBP will increase the percentage of CMS hospital reimbursement at risk under the VBP program and will include outcome measures. Now, CMS is planning to extend this program to physicians and physician groups under the new Value Based Payment Modifier (VBM).

Starting on January 1, 2015 VBM will apply to large physician groups (those with more than 100 physicians under the same Tax ID Number) and will transition to all physicians and physician groups by January 1, 2017. Although the reimbursement changes will not occur until 2015, CMS will use 2013 data to calculate the 2015 VBM reimbursements. In addition, physician groups must select their data reporting methodology in 2013. So, although the actual change goes into effect two years from now, we need to start preparing now.

One of the challenges for the VBM program will be its definition of “value.” Typically, value in healthcare refers to outcome divided by cost. But for many specialty physicians, it will be difficult to impossible to determine outcomes and/or costs.

For example, emergency physicians see patients for a single encounter, perform interventions, and then direct care to others. Although this specialty plays a critical role in healthcare, emergency physicians do not work with patients and their primary care physicians over time to affect outcomes and control costs. For radiology, pathology, and other specialties that don’t evaluate patients themselves but rather interpret testing ordered by other physicians, determining value will be even harder. While VBM may work well for certain physicians and for physician groups such as primary care, it will be challenging for CMS to devise a methodology across all specialties that will fairly measure and reimburse value.

While specific criteria of value may differ by specialty, certain basics such as patient experience, patient safety, care coordination, and process measures do apply across specialties and may be reasonable in determining value. Fortunately, the Affordable Care Act allows CMS a significant amount of flexibility in terms of how they define their methodology and implement VBM. I trust that they will work to design a program that creates a fair and level playing field for all physicians.

Given that VBM, like VBP, will only affect 1-2 % of physician reimbursements, the questions arises whether this is enough incentive to induce high performing physicians or physician groups to improve, or low performing physicians or physicians group to change? Can VBM meet its goals of improving the quality of care while reducing costs?

I anticipate that if the VBM program is drafted appropriately it will enable emergency physicians and other specialists to focus on utilization, develop collaborative processes, and innovate to improve the quality of care while managing costs. The effect of a modest financial nudge (one to two percent of CMS reimbursement) may be tremendous if it unleashes the ingenuity of physicians across the Acute Care Continuum.

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Nice post. I suspect the driver will be less the 2% incentive, and more the expectations of hospitals that hospital-based physicians work in. VBM may not directly affect the hospital's reimbursement, but the CEO will expect these docs to participate, and meet the standards, anyway.

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